Estimating VARs with long stationary heterogeneous panels: A comparison of the fixed effect and the mean group estimators

The most promising candidates for estimating vector autoregressive models with long, stationary, possibly heterogeneous panel data sets (panel-VARs) are the fixed effect (FE) and the mean group (MG) estimators. With a view to providing guidance to applied researchers on how to pool in a panel-VAR, this paper compares the performance of the FE and the MG estimators both asymptotically and in Monte Carlo simulations. The main results of the analysis suggest the use of both estimators in applied work. If FE and MG estimates give similar estimates, the FE estimator should be used because it is more efficient. If they differ, the MG estimator should be used only if the panel is sufficiently long — say, twice as long as usually recommended in the dynamic panel data literature. If FE and MG estimates differ and the panel is not long enough, neither is generally a desirable alternative and other estimation techniques are needed.     

Global Standards and Ethical Stock Indexes: The Case of the Dow Jones Sustainability Stoxx Index

The increased scrutiny of investors regarding the non-financial aspects of corporate performance has placed portfolio managers in the position of having to weigh the benefits of ‘holding the market’ against the cost of having positions in companies that are subsequently found to have questionable business practices. The availability of stock indexes based on sustainability screening makes increasingly viable for institutional investors the transition to a portfolio based on a Socially Responsible Investment (SRI) benchmark at relatively low cost. The increasing share of socially responsible investments may play a role in providing incentives towards a continuous upgrading of sustainability standards to the extent that their performance is not systematically inferior to that of the other funds. This article examines whether these incentives have been so far detectable with particular reference to the Dow Jones Sustainability Stoxx Index (DJSSI) that focuses on the European corporations with the highest CSR scores among those included in the Dow Jones Stoxx 600 Index. The aim of the article is twofold. First, we analyse the performance of the DJSSI over the period 2001–2006 compared to that of the Surrogate Complementary Index (SCI), a new benchmark that includes only the components of the DJ Stoxx 600 that do not belong to the ethical index to evaluate more correctly the size of possible divergent performances. Second, we perform an event study on the same data set to analyse whether the stock market evaluation reacts to the inclusion (deletion) in the DJSSI. In both cases, the results suggest that the evaluation of the CSR performance of a firm is a significant criterion for asset allocation activities.     

Land Use Change with Spatially Explicit Data: A Dynamic Approach

Most of the economic literature that uses spatially-explicit data to estimate the determinants of land-use change is limited to static models and cross-sectional data sets. Recent attempts to move to a more dynamic analysis include using panel data sets and survival analysis. In this study, we use a discrete choice dynamic model of land-use where the agent’s choices are regarded as the solution to a dynamic optimization problem. The irreversibility of some decisions, expectations about future prices, and forward-looking behavior of the land operator can all be accounted for. Our results show that a model specification that incorporates some of the complexities of the decision process improves upon results found in the existing literature. First, prediction accuracy of land use change is superior to any of the existing models. Second, we demonstrate that models that do not account for transactions costs tend to overestimate the effects of changes in transportation costs.     

The asymmetric effects of oil shocks on output growth: A Markov–Switching analysis for the G-7 countries

Oil shocks are generally acknowledged to have important effects on both economic activity and macroeconomic policy. The aim of this paper is to investigate how oil price shocks affect the growth rate of output of a subset of developed countries by comparing alternative regime switching models. Different Markov–Switching (MS) regime autoregressive models are, therefore, specified and estimated. In a successive step, univariate MS models are extended in order to verify if the inclusion of asymmetric oil shocks as an exogenous variable improves the ability of each specification to identify the different phases of the business cycle for each country under scrutiny. Following the wide literature on this topic, seven different definitions of oil shocks which are able to describe oil price changes, asymmetric transformations of oil price changes, oil price volatility, and oil supply conditions are considered.     

Effects of background music endings on consumer memory in advertising

Background music is widely used in advertising to attract audiences' attention. However, no research to date has considered the effect of background music endings on consumer memory for advertised products and messages. Across two experiments, the present research shows that background music that ends abruptly (i.e., truncated ending) distracts consumers' attention, reducing memory for both products and messages, compared to background music that ends with a note in the chord of the dominant tonality (i.e., regular ending) or that concludes with a fading-out ending.     

Two Wrongs Make a ‘Right’? Exploring the Ethical Calculus of Earnings Management Before Large Labor Dismissals

Journal of Business Ethics - This paper examines whether firms strategically legitimize large labor dismissals (LLDs) by performing ex-ante downward earnings management. We further assess whether...     

Trade effects of geographical indication policy: The EU case

Using a new detailed dataset on country-product information on European Union (EU) Geographical Indications (GIs), we study the impact of this food quality policy on trade margins over the 1996–2014 period. We consider the effect of GIs on both intra- and extra-EU trade margins (extensive and intensive), as well as on export (and import) unit values. Our main results show that GIs affect trade flows differently depending on whether GIs are produced by the exporter or importer country. The presence of GIs in the exporter country systematically exerts a positive trade effect on both the extensive and intensive trade margin. When registered only in the importer country, GIs seem to act weakly as a trade-reducing measure, at least at the intensive trade margin. In addition, GIs positively affect export prices, consistent with the idea that GI products are perceived by consumers as higher quality goods. Importantly, extra-EU trade margins react similarly to those on intra-EU trade. These results have clear and interesting implications concerning the EU strategy of promoting the protection of GIs worldwide.